The US economy grew at a "sluggish to modest" pace at the start of the year, helped by slightly stronger consumer spending as retailers cut prices to clear their shelves, the Federal Reserve said yesterday.

In its latest Beige Book summary of national economic activity, the central bank said there was no sign of widespread price pressures except in energy, and said more than half of the Fed's 12 regional Fed banks reported some signs of easing in labour markets in their areas.

The latest report, which covers the period from January 10th-February 26th, implied the United States' record economic expansion remained intact though it clearly has lost much of the sizzle it once displayed.

Economists said the report could encourage, and certainly would not hinder, the Fed from cutting interest rates for the third time this year.

The findings will be used by members of the central bank's policy setting Federal Open Market Committee when they meet on March 20th to plot interest-rate strategy.

"It's a more positive Beige Book than the last one," Dallas Fed president Mr Robert McTeer, who is not a voting member of the FOMC this year, told reporters after delivering a speech in Dallas. "The last one was really bad. This is more mixed so I think it offers some encouragement."

Some sectors were in the doldrums at the start of the year, notably manufacturing, in which the Fed said activity continued to weaken while inventories were piling up for some products like steel and telecommunications equipment.